Pimco Total Return ETF Seen As Better Bet

7/30/2012 8:09AM

The new Pimco Total Return Exchange-Traded Fund (BOND) is a "clear winner" over its namesake mutual fund cousin (PTTRX), says Matt Hougan, head of analytics at IndexUniverse. While both are led by Bill Gross in a similar manner, the ETF has been outperforming since launching in March.

This transcript has been automatically generated and may not be 100% accurate.

... the rarer the room ... are off to a strong start working on the two thousand and twelve ... with me today is met coking ... and analytics for IndexUniverse ... that everybody's talking about Bill Gross's Total Return Fund and the differences between the mutual fund and ETF so far the ETF ... has outperformed meet will find ... by leaps and they'll ship absolutely it what you should be that ... all the way we think of it is the sort of Bill Gross's best ideas on if you think about the whole return on its two letter and sixty billion dollars that's like an ... aircraft carrier if he is a little particular credit analysis of the things he has an edge on ... it'll have absolutely no impact on that size portfolio ... Bunzl Ablin D it's now two billion dollars give or take ... it was a billion dollars not that long ago that small enough for that kind of micro analysis can have a real impact on returns I think part of that ... is what's driving it up for mistresses of the institutional fund market on ... last week ... in the OED which is the ticker symbol for the ETF ... has ... grown in terms of holdings individual holdings by a ... over hundred pound t think it's that sort of different is going to be warm and wise as the court was ... it will obviously but by definition it'll be it'll be minimize reverence to less than one percent of the assets of the total return bond fund so ... it does along with ego between here and there we might have a discussion money gets up to ten million ... or fifty million but at this point ... it's still a very small portfolio for a guy like Bill Gross to manage ... he's having to manage ... you know effectively the total return portfolio on yield curve positioning and shiny and that's in a small portfolio he can do real credit analysis and economic impact ... what about the derivatives ... Michael ... Shari allows me to the fact that the ETF can use derivatives ... Pimco courses is no big deal but it has to be some sort of being the or they would use them in the bond fund that has to walk to use those derivatives ... what we seen them use for his primarily hedging some downside risk management ... so that's the kind of thing that will appear in till it really if you try so there are no CBS contracts there's no exposure heads ... in the Lindy so you know maybe in a terrible environment in Europe and close there might be a little bit more risk ... in the Lindsay ... then the essential bond fund although Pimco will tell you that it's figured out how to hedge and both or all of us ... so he is the ETF unclear when or at least for now ... well I think ... for most ... average investors who don't have access to the institutional share costs of the total return bond fund ... the combination of cost advantage liquidity advantage ... and performance ... does make it clear winner ... would you rather have Bill Gross Mandi two hundred sixty billion dollars and buying a small part of the portfolio ... for him having more like two billion dollars ... now I imagine there's more risk in beyond the ... bow with that risk so far has come significantly more time ... a big part of this strategy has been the use of derivatives in the vehicle ... absolutely right it's a it's an easy quick way to get large exposure to the market ... always seen over and the and beyond the is more specific applications There's a top down macro strategy so you're seeing ... huge positions in the top ten in Mexico which is one of Pimco's favourite countries right now ... you're seeing a lot more credit analysis playing out there so yes ... derivatives have been used extensively in the total return bond fund ... but the best part and parcel of that and it is so darn big ... it's hard to Steve ... IDC actively managed ETF is purses passively managed ... index tracking ETF is so far well I still think actively managed ETF a long way to go right there is not much assets outside of the U N D ... an outside of maybe means ... rate in the actively managed is ... the problem with actually menace fund says they're mostly sold on commission or on track record ... and a newly launched ETF has neither I think ill be a number of years before we see a lot of successful actively managed equity to us what that will blow to the ETS yellow volatility has been a huge home run rate billions of dollars of flown in investors ... bought and ... a lot of people position assertive hedge fund late ... aam I think they're interesting strategies ... you always worry that those things are lost at the top of become very popular ... it's easy to access backwards and generate ... really good looking returns and forecasts the dawn ... of a few years from now I have no idea how that's can play ... can thank you very much man thank you Mary ...